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The following excerpts are from the 2013 Walgreen Co. Form 10-K. CONSOLIDATED BALANCE SHEETS Walgreen Co, and Subsidiaries at August 31, 2013 and 2012 (in millions, except shares and per share amounts) 2013 2012 $ 2,106 $ 1,297 2,632 2,167 6,852 7,036 284 260 11,874 10,760 12,138 12,038 2,410 2,161 6,261 6,140 839 866 1,959 1,497 23,607 22,702 $ 35,481 $33,462 Assets Current Assets Cash and cash equivalents Accounts receivable, net Inventories Other current assets Total Current Assets Noncurrent Assets Property and equipment, at cost, less accumulated depreciation and amortization Equity investment in Alliance Boots Alliance Boots call option Goodwill Other noncurrent assets Total Noncurrent Assets Total Assets Liabilities and Shareholders' Equity Current Liabilities Short-term borrowings Trade accounts payable Accrued expenses and other liabilities Income taxes Total Current Liabilities NonCurrent Liabilities Long-term debt Deferred income taxes Other noncurrent liabilities Total Noncurrent Liabilities Commitments and Contingencies (see Note) Shareholders' Equity Preferred stock, $.0625 par value; authorized 32 million shares; none issued Common stock, $.078125 par value; authorized 3.2 billion shares; issued 1,028,180,150 shares in 2013 and 2012 Paid-in capital $570 4,635 3,577 101 8,883 $ 1,319 4,384 3,019 8,722 4,477 600 2,067 7,144 4,073 545 1,886 6,504 - 80 1,074 80 936 Employee stock loan receivable (11) (19) Retained earnings 21,523 20,156 Accumulated other comprehensive (loss) income (98) 68 Treasury stock at cost, 81,584,572 shares in 2013 and 84,124,816 shares in 2012 (3,114) (2,985) Total Shareholders' Equity 19,454 18,236 Total Liabilities and Shareholders' Equity $ 35,481 $33,462 The accompanying Notes to Consolidate Financial Statements are integral parts of these statements. Notes to Consolidated Financial Statements 1. Summary of Major Accounting Policies Description of Business The Company is principally in the retail drugstore business and its operations are within one reportable segment. At August 31, 2013 there were 8,582 drugstore and other locations in 50 states, the District of Columbia, Guam, and Puerto Rico. Pre- scription sales were 62.9% of total sales for fiscal 2013 compared to 63.2% in 2012 and 64.7% in 2011. Allowance for Doubtful Accounts The provision for bad debt is based on both historical write-off percentages and specifically identified receivables. Activity in the allowance for doubtful accounts was as follows (In millions): 2013 Balance at beginning of year Bad debt provision Write-offs Balance at end of year $ 99 124 (69) $ 154 2012 $ 101 107 (109) $ 99 2011 $ 104 88 (91) $ 101 Inventories Inventories are valued on a lower of last-in, first-out (LIFO) cost or market basis. At August 31, 2013 and 2012, inventories would have been greater by $2.1 billion and $1.9 billion, respectively, if they had been valued on a lower of first-in, first-out (FIFO) cost or market basis. As a result of declining inventory levels, the fiscal 2013 and 2012 LIFO provisions were reduced by $194 million and $268 million of LIFO liquidation, respectively. Inventory includes product costs, inbound freight, warehousing costs, and vendor allowances not classified as a reduction of advertising expense. WALGREEN CO. INFORMATION FROM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended August 31, 2013 and 2012 (in millions) 2013 2012 Sales $ 72,217 $ 71,633 Net income $ 2,450 $ 2,127 Extracted from 10-K filings for Walgreen Co. 2013. Obtained from U.S. Securities and Exchange Commission. www.sec.gou Required: 1. Using the consolidated balance sheet of Walgreens Co. for August 31, 2013 and 2012, prepare a common size balance sheet 2. Which current asset is the most significant? Which non-current asset is the most significant? Are the relative proportions of current and non-current assets what you would expect for a drug store? 3. Analyse accounts receivables and allowance for doubtful accounts. 4. What inventory method is used to value inventories? Has Walgreens experienced inflation or deflation? Explain your answer. Explain the reference in the inventory note to the LIFO liquidation and what this means with regards to net income reported. 5. Assess the level of debt and risk that Walgreens has by looking only at the balance sheet. 6. Estimate the dollar amount of dividends Walgreen paid in 2013

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